Supplemental Appendix — Lightfoot v. Cendant Mortg. Corp., 136 S. Ct. 289 (2015) (No. 14-1055)

1453055

IN THE FEB

Supreme Court of the United States

CRYSTAL LIGHTFOOT

AND BEVERLY HOLLIS-ARRINGTON,

Petitioners,

U.

CENDANT MORTGAGE CORP. D/B/A PHH

MORTGAGE, FANNIE MAE, ROBERT O. MATTHEWS

AND ATTORNEYS EQUITY NATIONAL CORP.,

Respondents.

On Petition For A Wait or CERTIORARI TO THE UNITED

States Court or APPEALS FoR THE NinTH Cixcurr

SUPPLEMENTAL APPENDIX

ANDREW H. FRIEDMAN

Counsel of Record

Grecory D. HELMER

ANDREA K. Love_Less

HELMER FRIEDMAN, LLP

8522 National Boulevard, Suite 107

Culver City, California 90232

(310) 396-7714

afriedman@helmerfriedman.com

Attorneys for Petitioners

COUNSEL PRESS

(800) 274-321 00 359-6859

i

TABLE OF SUPPLEMENTAL APPENDICES

Page

APPENDIX A—JUDGMENT OF THE UNITED

STATES DISTRICT COURT, CENTRAL

DISTRICT OF CALIFORNIA, FILED

eres ese eee eee Sal

APPENDIX B — ORDER OF THE UNITED

STATES DISTRICT COURT, CENTRAL

DISTRICT OF CALIFORNIA, FILED

eee eee SA2

SAl

APPENDIX A — JUDGMENT OF THE UNITED

STATES DISTRICT COURT, CENTRAL DISTRICT

OF CALIFORNIA, FILED JUNE 11, 2010

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CRYSTAL LIGHTFOOT, ET AL.,

Plaintiffs,

V.

CENDANT MORTGAGE, ET AL.,

Defendants.

No. CV 02-6568 CBM (AJ Wx)

JUDGMENT

In accordance with Federal Rule of Civil Procedure

58 and Whitaker v. Garcetti, 486 F.3d 572, 579 (9th Cir.

2007) (requiring that ajudgment must be set forth on

a separate document), and consistent with the Court’s

Order Dismissing the Action With Prejudice Against

Defendant Attorneys Equity National Corporation, [Doc.

No. 103.], IT IS ORDERED AND ADJUDGED that

judgment be entered in favor of Defendant Attorneys

Equity National Corporation.

IT IS SO ORDERED.

DATED: June 11, 2010

By /s/

CONSUELO B. MARSHALL

UNITED STATES DISTRICT JUDGE

SA2

APPENDIX B — ORDER OF THE UNITED

STATES DISTRICT COURT, CENTRAL DISTRICT

OF CALIFORNIA, FILED JUNE 11, 2010

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

CRYSTAL LIGHTFOOT, ET AL.,

Plaintiffs,

V.

CENDANT MORTGAGE, ET AL.,

Defendants.

No. CV 02-6568 CBM (AJ Wx)

ORDER DISMISSING THE ACTION WITH

PREJUDICE AGAINST DEFENDANT

ATTORNEYS EQUITY NATIONAL CORPORATION

The Court, on its own motion, dismisses the action

with prejudice against Defendant Attorneys Equity

National Corporation (“Attorneys Equity”) based on the

doctrine of res judicata.

FACTUAL AND PROCEDURAL BACKGROUND

I, FACTUAL BACKGROUND

The dispute arises out of the foreclosure and

subsequent sale of real property located at 7106 McLaren

SA3

Appendix B

Ave., West Hills, CA 91307 (the “Property”), which was

previously owned by Plaintiffs Beverly Ann Hollis-

Arrington (“Hollis-Arrington”) and Crystal Monique

Lightfoot (“Lightfoot”). Hollis-Arrington refinanced

the loan on the Property through Defendant Cendant

Mortgage Corporation (“Cendant”) in August 1999.

(Verified Complaint (“Compl.”) at J 9.) Defendant Federal

National Mortgage Association (“Fannie Mae”) purchased

the loan on the Property from Cendant. (Id. at N 10-11.)

Hollis-Arrington defaulted on her first payment and

failed to make any subsequent payments on the Property.

(Id. at N 11-12.) In January 2000, after three months of

nonpayment, Hollis-Arrington submitted an application

for forbearance to Cendant. (Id. at 1 12.) No forbearance

was granted, and the Property entered foreclosure.' (/d. at

4 16.) On or about April 24, 2000, Attorneys Equity became

the trustee for the Property. (Id. at J 14.) In August

2000, Cendant repurchased the loan from Fannie Mae

because it failed to meet Fannie Mae’s credit standards.

[See Doc. No. 79.] At some point prior to September 14,

2000, Hollis-Arrington transferred the Property to her

daughter, Lightfoot, by quitclaim deed. (Compl. at J 18.)

The Property was ultimately sold at a trustee’s sale. (/d.

at J 30.)

1. Hollis-Arrington alleges that she was promised, then

denied, a forbearance. (Id. at N 15-16.)

SA4 |

Appendix g

II. PROCEDURAL HISTORY OF RELATED

ACTIONS

a. Hollis-Arrington v. Cendant Mortgage Corp. et

al., CV 00-11125 CBM (AJWx) (“first action”)

On October 18, 2000, Hollis-Arrington filed a

complaint in this Court against Cendant and United

Guaranty Residential Insurance Company (“United

Guaranty”), alleging four causes of action: (1) breach

of the covenant of good faith and fair dealing; (2) fraud

and deceit; (3) negligence; and (4) intentional infliction of

emotional distress. [CV 00-11125, Doc. No. 1.]

On January 5, 2001, Hollis-Arrington applied for a

temporary restraining order to prevent the sale of the

Property. [CV 00-11125, Doc. No. 21.] On January 10,

2001, the Court scheduled a hearing on the matter for

January 29, 2001, and also ordered that the non-judicial

foreclosure sale of the Property be postponed by Cendant

until February 6, 2001. [CV 00-11125, Doc. No. 25.] On

February 1, 2001, after a hearing on the matter, the Court

denied Hollis-Arrington’s Application for a Temporary

Restraining Order.“ (CV 00-11125, Doc. Nos. 43-44.)

On May 31, 2001, the Ninth Circuit dismissed Hollis-

Arrington’s appeal of the Court’s order. [CV 00-11125,

Doc. No. 59.

2. The Court also set aside defaults previously entered by

the Clerk of Court against Cendant and United Guaranty. [CV

00-11125, Doc. No. 44.]

SA5

Appendix B

During the pendency of the first action, Plaintiffs filed

bankruptcy petitions. [See CV 00-11125, Doc. No. 58.] The

action was thereafter subject to an automatic stay and

removed from the Court’s active calendar on May 23, 2001.

[CV 00-11125, Doc. No. 58.] On July 31, 2001, the Court, by

stipulation and order, dismissed the action with prejudice

as against United Guaranty. (CV 00-11125, Doc. No. 62.

On October 5, 2001, the case was restored to the Court's

active calendar. [CV 00-11125, Doc. No. 73.)

On July 15, 2002, the Court granted Cendant’s Motion

for Summary Judgment, «nd judgment was entered

forthwith in Cendant’s favor. [CV 00-11125, Doc. Nos.

102-03.] The Ninth Circuit affirmed the Court’s order on

May 16, 2003. [CV 00-11125, Doc. No. 120.) On August 29,

2003, the Court denied Plaintiffs’ Motion to Set Aside the

Judgment. [CV 00-11125, Doc. No. 127.] The Ninth Circuit

dismissed Hollis-Arrington’s appeal of the Court’s order

for failure to prosecute.

b. Hollis-Arrington v. Cendant Mortgage Corp. et

al., CV 01-5658 CBM (AJ Wx) (“second action”)

On June 27, 2001, Hollis-Arrington filed the second

action against Cendant, Fannie Mae, and First American

Title Company (“First American”), which also related to

the foreclosure and sale of the Property. [CV 01-5658,

Doc. No. 1.] On July 3, 2001, she filed a First Amended

Complaint. [CV 01-5658, Doc. No. 5.]

On July 27, 2001, default was entered against Cendant

by the Clerk of Court. [CV 01-5658, Doc. No. 13.] On

SA6

Appendiz B

August 6, 2001, the Court vacated and set aside the default

against Cendant because the default was filed in error.

[CV 01-5658, Doc. No. 23.] Ten days later, on August 16,

2001, the Court, by stipulation and order, dismissed the

action with prejudice as against First American. [CV 01-

5658, Doc. No. 33.]

On September 11, 2001, Hollis-Arrington filed an Eæ

Parte Application for a Temporary Restraining Order to

prevent third-party purchasers from evicting her from

the Property pending the Court’s determination of her

Motion to Vacate or Set Aside the Foreclosure Sale, and

a stay pending appeal. (CV 01-5658, Doc. No. 45.] On

November 29, 2001, the Ninth Circuit affirmed the Court’s

September 14, 2001 order denying Hollis-Arrington’s Ex

Parte Application. [CV 01-5658, Doc. Nos. 47, 61.]

On December 4, 2001, the Court granted the third-

party purchasers’ request for leave to intervene to

expunge the lis pendens on their title to the Property.

[CV 01-5658, Doc. No. 65.) Thereafter, on February 12,

2002, the Court denied Hollis-Arrington’s Motion to Set

Aside the Foreclosure Sale, granted in part Fannie Mae’s

Motion to Dismiss with Prejudice, granted the third-party

purchasers’ Motion to Expunge the lis pendens on their

title to the Property, and granted Hollis-Arrington leave

to file an amended complaint. [CV 01-5658, Doc. No. 105.

On March 12, 2002, Hollis-Arrington filed a Second

Amended Verified Complaint against Cendant, Fannie Mae,

and Attorneys Equity alleging thirteen causes of action:

(1) Racketeer Influenced and Corrupt Organizations Act

SA7

Appendix B

(“RICO”) violations; (2) Truth in Lending Act (“TILA”)

violations; (3) enforcement of rescission on the Property;

(4) violation of the Real Estate Settlement Procedures Act

(“RESPA”); (5) conspiracy to violate right to due process;

(6) violation of right to due process pursuant to 42 U.S.C.

§ 1983; (7) fraud and deceit; (8) negligent misrepresentation;

(9) civil conspiracy; (10) intentional infliction of emotional

distress; (11) violation of foreclosure procedure pursuant

to state law; (12) quiet title; and (13) slander of title. [CV

01-5658, Doc. No. 109.}

On February 12, 2002, the Court granted Fannie

Mae’s Motion to Dismiss Plaintiff's RESPA claim with

prejudice. [CV 01-5658, Doc. No. 105.] On March 15, 2002,

Fannie Mae and Cendant separately filed Motions to

Dismiss the second action. [CV 01-5658, Doc. No. 110-11.)

On May 28, 2002, the Court granted with prejudice Fannie

Mae and Cendant’s Motions to Dismiss Hollis-Arrington’s

RICO, TILA, and Section 1983 claims but reserved ruling

on the state law claims pending responses to a Court-

issued Order to Show Cause. (CV 01-5658, Doc. No. 131.

On July 1, 2002, after having reviewed and received the

parties’ responses to the Court’s Order to Show Cause,

the Court dismissed with prejudice all remaining state

claims against all defendants, as a matter of law or for

failure to state a claim. (CV 01-5658, Doc. Nos. 135-36.

Judgment was entered in favor of Cendant, Fannie Mae,

and non-appearing Attorneys Equity as to all of Hollis-

Arrington’ s claims. [CV 01-5658, Doc. No. 136.] On April

3. Plaintiff withdrew her RESPA claim us to al] remaining

defendants. [CV 01-5658, Doc. No. 131.]

SA8

Appendiz B

17, 2003, the Ninth Circuit affirmed the judgment of the

Court. [CV 01-5658, Doc. No. 152.)

On August 29, 2003, the Court denied Hollis-

Arrington’s Motion to Set Aside the Judgment. [CV

01-5658, Doc. No. 162.) The Ninth Circuit subsequently

denied Hollis-Arrington’s petition because the case did not

warrant intervention by the Ninth Circuit. [CV 01-5658,

Doc. No. 166.

c. The Instant Action

On July 18, 2002, Plaintiffs filed the instant action in

the Los Angeles Superior Court against Cendant, Fannie

Mae, Robert A. Matthews (“Matthews”), and Attorneys

Equity, alleging the following: (1) wrongful foreclosure;

(2) the trustee’s sale should be voided; (3) fraud and

deceit; (4) racial discrimination in violation of the Unruh

Act; (5) violation of California state law due to fraud,

quiet title, and adverse possession; (6) slander of title;

(7) negligent misrepresentation; (8) civil conspiracy; (9)

intentional infliction of emotional distress; and (10) adverse

possession. Plaintiffs also sought declaratory relief.

Fannie Mae petitioned to remove the case to the

federal district court on August 22, 2002. [Doc. No.

I.] Cendant, Attorneys Equity, and Defendant Robert

Matthews separately joined in the notice of removal of the

action on August 23, 2002. [Doc. Nos. 3-4, 6.] Plaintiffs’

Ex Parte Application to remand the case back to the Los

Angeles Superior Court was denied by the Honorable

Ronald S.W. Lew on September 5, 2002. [Doc. No. 18.]

SA9

Appendiæ g

On September 13, 2002, Plaintiffs filed a Notice of Appeal

from the Court’s Order. [Doc. No. 30.) The Ninth Circuit

granted Plaintiffs’ Motion for Voluntary Dismissal on

October 31, 2002. [Doc. No. 49.

i. Disposition with Respect to Fannie Mae,

Cendant, and Matthews

On August 27, 2002, Fannie Mae and Cendant filed

a Motion to Dismiss the instant action. [Doc. No. 12.)

The following day, on August 28, 2002, Matthews filed

a Motion to Dismiss. [Doc. No. 10.] On September 12,

2002, the Court granted Fannie Mae’s and Cendant’s

Motion for Temporary Protection Order and for Order

Staying Discovery pending the Court’s disposition of the

pending Motions to Dismiss. [Doc. No. 26.] On February

20, 2003, the Court granted Cendant’s and Fannie Mae’s

Motion to Dismiss based on the doctrine of res judicata

because the two earlier actions involved the same claim,

the same parties or parties in privity with previous

parties, and final judgments on the merits were entered

in those actions.‘ [Doc. No. 59.] On April 11, 2003, the

Ninth Circuit dismissed the appeal for lack of jurisdiction.

[Doc. No. 67.] The Court denied Plaintiffs’ Motion to Set

Aside the Judgment on August 29, 2003. [Doc. No. 79.

On January 6, 2004, it appears that the Ninth Circuit

affirmed the Court’s order denying Plaintiffs’ Motion to

Set Aside the Judgment. [Doc. Nos. 80, 89.] The Court

entered judgment in favor of Cendant, Fannie Mae, and

Matthews on October 21, 2009. [Doc. No. 99.}

4. The Court also granted Matthews’ Motion to Dismiss

for Failure to State a Claim. [Doc. No. 59.]

SA10

Appendiz B

ii. Case Status with Respect to Attorneys

Equity

On August 30, 2002, Plaintiffs filed a request for

entry of default as to Attorneys Equity. [Doc. No. 16.] The

request was denied due to deficiencies with the proof of

service. [Doc. No. 17.] Plaintiffs filed an amended proof

of service on September 6, 2002; default was entered by

the clerk as to Attorneys Equity on September 9, 2002.

[Doc. Nos. 19, 22.] On September 18, 2002, Plaintiffs

filed a Motion for Default Judgment against Attorneys

Equity. [Doc. No. 37.] On June 26, 2003, Plaintiffs filed

an Ex Parte Application for Renewed Motion to Enter

Default Judgment against Attorneys Equity. [Doc. No.

74.] On August 29, 2003, the Court denied Plaintiffs’ Eæ

Parte Application for Renewed Motion to Enter Default

Judgment because Plaintiffs’ Ex Parte Application and

supporting declaration failed to prove the damages alleged

in the Verified Complaint. [Doc. No. 78.]

On January 5, 2004, the Court removed the action

from the active calendar. [Doc. No. 88.] On January 6,

2004, it appears that the Ninth Circuit affirmed the

Court’s order denying Plaintiffs’ Motion to Set Aside the

Judgment and the Court’s order denying Plaintiffs’ Ex

Parte Application for Renewed Motion to Enter Default

Judgment Against Attorneys Equity. [Doc. Nos. 80, 89.]

Plaintiffs’ mandamus petition was denied by the Ninth

Circuit on November 3, 2008. [Doc. No. 90.]

SA11

Appendix B

On April 7, 2009, Plaintiffs filed a “Motion to Restore

Case to Active Caseload for Purpose of Entering Final

Judgment; Pursuant to Rule 54(b,c) of the F.R.C.P.”

(“Plaintiffs’ Motion to Restore”). Doc. No. 92.) The Court

issued an Order to Show Cause ordering Attorneys Equity

to respond to Plaintiffs’ Motion to Restore on May 6, 2009.

Doc. No. 96.] Attorneys Equity filed a response on May 18,

2009. [Doc. No. 97.] Plaintiffs filed their reply on May 20,

2009. [Doc. No. 98.] Plaintiffs, meanwhile, filed a Petition

for a Writ of Mandamus in the Ninth Circuit and the

Court issued an order abstaining from ruling on Plaintiffs’

Motion to Restore pending disposition of the matter by the

Ninth Circuit. [Doc. No. 100.] On April 14, 2010, the Ninth

Circuit denied Plaintiffs’ Petition for a Writ of Mandamus

without prejudice, finding that Plaintiffs may file a new

petition if the Court has not entered a final judgment as

to Attorneys Equity within 60 days of the Ninth Circuit’s

order. [Doc. No. 101.]

On May 27, 2010, the Court granted Plaintiffs’ Motion

to Restore and further ordered Plaintiffs to show cause as

to why the action shall not be dismissed with prejudice as

to Attorneys Equity based on the doctrine of res judicata.

Doe. No. 102.) Plaintiffs did not respond to the Court’s

Order to Show Cause.

DISCUSSION

The instant action, which was dismissed as to the

other defendants based on the doctrine of res judicata,

must also be dismissed as to Attorneys Equity.

SA12

Appendix B

I. THE COURT, SUA STE. RAISES THE ISSUE

OF DISMISSAL

To prevent judicial waste and facilitate the orderly

administration of justice, “if a court is on notice that it

has previously decided the issue presented, the court may

dismiss [an] action sua sponte, even though the defense

has not been raised.” Arizona v. California, 530 U.S. 392,

412 (2000) (internal citations omitted); Headwaters Inc. v

U.S. Forest Serv., 399 F.3d 1047, 1054-55 (9th Cir. 2005);

Columbia Steel Fabricators, Inc. v. Ahlstrom Recovery,

44 F.3d 800, 802-03 (9th Cir. 1995) (“Res judicata doctrine

preserves scarce judicial resources, as well as protecting

ee . 80 courts have an

interest in raising it, even if a party does

— — must be given an opportunity

to be heard. Headwaters, 399 F.3d at 1055.

The Court has been involved in three actions initiated

wholly, or in part, by Hollis-Arrington. The Court

therefore has extensive knowledge of the facts, issues,

and parties involved in the three proceedings, all of which

concern the same underlying events - the foreclosure and

sale of the Property. The Court, sua sponte, raises the

issue of res judicata because entry of a default judgment

against Attorneys Equity would squarely conflict with

a prior judgment entered in Attorneys Equity’s favor.

See Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980)

(affirming the district court’s denial of a motion for entry

of a default judgment and sua sponte dismissal of the

plaintiff s claims); United States v. Approximately $28,000

in U.S. Currency, 2010 U.S. Dist. LEXIS 40302, 4 (N. D.

SA13

Appendix B

Cal. Apr. 5, 2010) (Conti, J.) (explaining that the entry of

default judgment is discretionary).

Plaintiffs have been heard previously on the issue

of whether their claims are barred under the doctrine

of res judicata. Cendant and Fannie Mae presented

the issue in their Motion to Dismiss in this action, and

Plaintiffs filed an opposition to their Motion to Dismiss and

appeared at a hearing on the matter. Although the Court

did not specifically address the issue of res judicata with

respect to non-appearing Attorneys Equity, the issue is

equally applicable to that defendant. See Columbia Steel

Fabricators, 44 F.3d at 803 (affirming a swa sponte grant of

summary judgment in favor of a non-appearing defendant

because the nonmoving party had the opportunity to be

heard on the issue of res judicata as it applied to another

defendant); Silverton v. Dept. of Treasury, 644 F.2d 1341,

1345 (9th Cir. 1981) (“A District Court may properly on

its own motion dismiss an action as to defendants who

have not moved to dismiss where such defendants are in

a position similar to that of moving defendants or where

claims against such defendants are integrally related.”).

Plaintiffs had an additional opportunity to be heard in

response to the Court’s Order to Show Cause dated May

27, 2010. Plaintiffs, however, failed to file a response. Thus,

the Court properly exercises its power to swa sponte raise

the issue of res judicata.

II. RES JUDICATA BARS THE INSTANT ACTION

AGAINST ATTORNEYS EQUITY

“(The doctrine of res judicata provides that a final

judgment on the merits bars further claims by parties

SAl4

Appendiz B

or their privities based on the same cause of action, and

is central to the purpose for which courts have been

established, the conclusive resolution of disputes within

their jurisdiction.” Hells Canyon Pres. Council v. US.

Forest Serv., 403 F.3d 683, 686 (9th Cir. 2005) (quoting

Headwaters Inc., 399 F.3d at 1051-52). The doctrine

serves “to conserve judicial resources, protect litigants

from multiple lawsuits, and foster certainty and reliance

in legal relations.” United States v. ITT Rayonier, Inc.,

627 F.2d 996, 1000 (9th Cir. 1980). A party bound by res

judicata is precluded from bringing claims that were

raised in the prior proceeding, but also claims that could

have been raised. Providence Health Plan v. McDowell,

385 F.3d 1168, 1173-74 (9th Cir. 2004). Res judicata only

applies where the following elements are satisfied: (1) an

identity of claims; (2) a final judgment on the merits; and

(3) privity between the parties. Hells Canyon, 403 F.3d

at 686.

a. Identity of Claims

The Ninth Circuit relies on the following factors to

determine whether the actions involve the same claims:

“(1) whether the rights or interests established

in the prior judgment would be destroyed or

impaired by prosecution of the second action;

(2) whether substantially the same evidence

— — [ ꝗm—ĩ——

the two suits involve infringement of the same

right; and (4) whether the two suits arise out of

the same transactional nucleus of facts.”

SAl5

Appendix B

Headwaters Inc., 399 F.3d at 1052 (internal quotations

and citations omitted). The fourth element is the most

important factor in the analysis. /d.

Here, the elements demonstrate that the claims at

issue in the prior proceedings correspond almost exactly

to the claims at issue in the instant action. Specifically, and

most importantly, the second action and the instant action

arise from the same transactional nucleus of facts—the

foreclosure and sale of the Property. See Western Sys., Inc.

v. Ulloa, 958 F.2d 864, 871 (9th Cir. 1992) (“Whether two

events are part of the same transaction or series depends

on whether they are related to the same set of facts and

whether they could conveniently be tried together.”). Both

complaints include allegations that Attorneys Equity

served as the trustee during the foreclosure process, and

that, in that capacity, Attorneys Equity unlawfully held

a trustee sale of the Property. The two actions therefore

necessarily involve the infringement of the same right,

Plaintiffs’ alleged ownership of and entitlement to the

Property.

Of the nine causes of action in the Verified Complaint in

the instant action, seven are almost identical to the causes

of action set forth in the second action.“ In the instant

5. In both actions, Plaintiffs seek relief for the defendants’

alleged deceit, fraud, intentional infliction of emotional distress,

wrongful foreclosure, and slander of title. In both actions,

Plaintiffs claim that Cendant, Fannie Mae, and Attorneys Equity

were involved in a conspiracy, though Plaintiffs relied on a RICO

theory in the second action and civil conspiracy theory in the

instant action.

SA16

Appendiz B

action, Plaintiffs also allege discrimination in violation of

the California Unruh Act and seeks to void the trustee’s

deed. Plaintiffs were clearly aware of these claims and

could have brought them in the second action because they

concern the same “transactional nucleus of facts”—the

loan to Hollis-Arrington by Cendant and the subsequent

foreclosure and sale of the Property. Tahoo-Sierra Pres.

Council, Inc. v Tahoe Reg Planning Agency, 322 F.3d

1064, 1078 (9th Cir. 2003) (“Newly articulated claims based

on the same nucleus of facts may still be subject to a res

judicata finding if the claims could have been brought in

the earlier action.”); Lindsay v. Beneficial Reins. Co., 59

F.3d 942, 952 (9th Cir. 1995) (res judicata applies even

if second action involves new evidence or new theories).

Indeed, in the second action, Plaintiffs specifically alleged

that the defendants conspired to offer and offered loans to

low- and middle-income people of color despite the fact that

those individuals did not qualify for the loans. Plaintiffs

also expressly sought to rescind the trustee’s deed and

invalidate the trustee’s sale. The two actions necessarily

rely on the same evidence—the loan process, the default

of the loan, and the foreclosure and sale of the Property.

Finally, the rights or interests established in Attorneys

Equity’s favor, and which resulted in the dismissal of the

second action with prejudice, would be impaired by the

entry of judgment against Attorneys Equity in the instant

action. The Court finds that an identity of claims exists

between the proceedings.

SA17

Appendiz B

b. Final Judgment on the Merits

A final judgment on the merits bars a plaintiff from

bringing the same cause of action in a new proceeding.

Hells Canyon, 403 F.3d at 686. A court’s dismissal for

failure to state a claim under Federal Rule of Civil

Procedure 12(b)(6) constitutes a final judgments on the

merits. See Stewart v. United States Bancorp, 297 F.3d

953, 957 (9th Cir. 2002) (explaining that “a dismissal for

failure to state a claim under Rule | 2(b)(6) is a judgment

on the merits’ to which res judicata applies.”) (internal

citations omitted).

In the second action, the Court dismissed Hollis-

Arrington’s claims against all defendants, including

non-appearing Attorneys Equity, as a matter of law or for

failure to state a claim and the Ninth Circuit affirmed the

judgment of the Court. [CV 01-5658, Doc. Nos. 136, 152.)

Accordingly, the Court finds that the Court’s order in the

second action constituted a final judgment on the merits.

c. Privity Between the Parties

Res judicata only binds those who were parties to,

or were in privity with parties to, the earlier actions. See

Hells Canyon, 403 F. 3d at 686. Privity “is a legal conclusion

designating a person so identified in interest with a party

to former litigation that he represents precisely the

same right in respect to the subject matter involved.”

Headwaters, 399 F.3d at 1052-53 (internal quotations

and citations omitted). “A nonparty can be bound by the

litigation choices made by his virtual representative, .

SA18

Appendix B

only if certain criteria are met: [A] close relationship,

substantial participation, and tactical maneuvering all

support a finding of virtual representation; identity of

interests and adequate representation are necessary to

such a finding.” Id. at 1053 (internal quotations omitted).

The parties in the second action are almost identical

to those in the instant action. Hollis-Arrington, Attorneys

Equity, Cendant, and Fannie Mae are parties in both

proceedings. Moreover, the Court is satisfied that Hollis-

Arrington was the virtual representative of Lightfoot, the

only non-party to the second action. The parties clearly

share a close relationship due to the fact that Lightfoot

is Hollis-Arrington’s daughter and resided in Hollis-

Arrington’s home, the Property. See Velazquez v. INS,

1999 U.S. Dist. LEXIS 17933, *8-10 (N.D. Cal. Nov. 10,

1999) (Jenkins, J.) (concluding that privity existed between

close relatives). Although Lightfoot was not a named party

to the second action, Hollis-Arrington transferred the

property to Lightfoot and Lightfoot filed a bankruptcy

petition to forestall the sale of the Property. Plaintiffs

therefore share the same interests in the claims and

Hollis-Arrington adequately and aggressively pursued

those claims in all prior proceedings. Thus, the Court

finds privity between Plaintiffs.

SA19

Appendix B

CONCLUSION

Based on the foregoing, the Court hereby orders that

the action be DISMISSED WITH PREJUDICE against

Attorneys Equity, and judgment entered forewith.

IT IS SO ORDERED.

DATED: June 11, 2010

By /s/

CONSUELO B. MARSHALL

UNITED STATES DISTRICT JUDGE